With tax-free money in a health savings account, a person can pay for eyeglasses or medical checkups as well as $1,700. baby cradle or 300 dollars online seminar for parents.
However, those same dollars cannot be used to pay for most baby formula, toothbrushes or insurance premiums.
President Donald Trump and some Republicans are proposing the bills as an alternative to expiring expanded federal subsidies that have lowered premium payments for most Americans covered by the Affordable Care Act. But legal restrictions on how HSAs can and cannot be used raise doubts that expanding their use will benefit predominantly low-income people who rely on ACA plans.
The Republican proposals follow a White House initiative to expand HSA eligibility to more ACA participants. One group that will almost certainly benefit: the many companies that sell expensive health products that can be purchased with tax-free account dollars.
There is also deep skepticism, even among conservatives who support the proposals, that the federal government can pull off such a major policy shift in just a few weeks. The expanded ACA subsidies are set to expire at the end of the year, and Republicans are still debating among themselves whether to simply extend them.
“The plans are in place. The bonuses are set. Many people have already registered and made their choices,” Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank, warned senators Nov. 19. “There is little this Congress can do to change mindsets.”
Cassidy's plan
With health savings accounts, people who pay high out-of-pocket costs for health insurance can set aside money for medical expenses tax-free.
For decades, Republicans have promoted these bills as a way to save money on major or emergency medical expenses without spending more federal taxes on health care.
The latest GOP proposals will be based on change included in the Republicans' One Big Beautiful Bill, which makes millions of new ACA enrollees eligible for Health Savings Accounts. Starting Jan. 1, those enrolled in Obamacare's lowest-cost insurance can open and contribute to an HSA.
Now, Republicans are arguing that instead of expanded pandemic-era ACA subsidies, it would be better to give patients money to cover some health care costs—particularly through HSA deposits.
However, the White House has not yet released a formal proposal. early reports suggested that this could include HSA contributions as well as temporary, more restrictive premium subsidies.
Sen. Bill Cassidy—the Louisiana Republican who chairs the Senate Health, Education, Labor and Pensions Committee and faces a potentially tough re-election fight next year—has proposed filling HSAs with federal dollars sent directly to some ACA participants.
“The American people want something passed, so let's find something that can pass,” Cassidy said Dec. 3 when reintroducing his HSA plan. “Let's give the power to the patient, not the profit of the insurance company.”
He promised that a deal could be concluded by 2026.
Democrats, whose support Republicans will likely need to pass any health care measures, have widely criticized the GOP's ideas. Instead, they are calling for an extension of expanded subsidies to control premium costs for most of the nearly 24 million Americans enrolled in the ACA marketplace, more than the 7.3 million people the Trump administration estimates will soon be eligible for an HSA.
HSAs “can be a useful tool for very wealthy people,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee. “But I don’t see it as a comprehensive health insurance option.”
Who can use an HSA?
The IRS places restrictions on the use of HSAs, which are typically administered by banks or health insurance companies. For starters, in the ACA marketplace, they are only available to those with the highest deductible health insurance plans—bronze and catastrophic plans.
There are limits on the amount that can be deposited into the account each year. In 2026, it will be $4,400 for an individual and $8,750 for a family.
Flexible spending accounts, or FSAs, which are typically offered through employer insurance, work similarly but have lower savings limits and cannot be rolled over from year to year.
The law establishing HSAs prohibits the accounts from being used to pay premiums, meaning that without an overhaul, the GOP proposals are unlikely to alleviate the problem at hand: skyrocketing premium payments. Obamacare beneficiaries who receive subsidies are expected to pay 114% on average, they will spend more on their premiums next year unless Congress acts.
Even with the government's promise to contribute cash to an HSA, people may still opt out of coverage next year once they see those premium costs, he said. Tom Buchmuellereconomics professor at the University of Michigan who served in the Biden administration.
“People who stay in the market will pay a lot more money every month,” he said. “It won’t help them pay their monthly premium.”
Others, Buchmueller noted, may be forced to take advantage of poorer insurance coverage. Bronze Obamacare plans have the highest out-of-pocket costs.
HHS Official's Interest
Health savings accounts can be used to pay for many routine health care items and services, such as medical and dental exams and emergency room visits. In recent years, the government has expanded essential purchases to include over-the-counter drugs such as Tylenol and tampons.
“General health” purchases, such as fees for dance or swimming lessons, are not allowed. No food, gym memberships or nutritional supplements are allowed unless prescribed by a physician for health reasons or necessity.
Americans invest more in these accounts as their insurance deductibles rise, according to Morningstar. The investment research firm found that assets in HSAs have grown from $5 billion 20 years ago to $146 billion last year. President George W. Bush signed the Health Savings Account Act into law in 2003. The White House promises at a time when they will “help more American families get the health care they need at a price they can afford.”
Since then, the accounts have become most common among wealthier white Americans who are healthy and have employer-sponsored health insurance, according to report published by the nonpartisan Government Accountability Office in September.
Now even more money is expected to flow into those accounts thanks to the One Big Beautiful Bill Act. Companies are turning their attention to the growing market for HSA-approved products, with major retailers such as Amazon, Walmart and Target creating online stores dedicated to devices, medications and supplies that can be purchased with account money.
In recent years, startups have emerged aimed at helping people quickly get approval from health care providers for various—and sometimes expensive—items, memberships, fitness services or medical services.
Truemed—a company co-founded in 2022 by Callie Means, a close ally of Health and Human Services Secretary Robert F. Kennedy Jr.—has become one of the biggest players in the niche.
For example, a $9,000 red cedar ice bath and a $2,000 hemlock sauna can be purchased with HSA funds through Truemed. The same can be said for a $1,700 bassinet that automatically responds to a newborn's cries, gently rocking him back to sleep.
Truemed executives say its most popular products are its low-cost fitness offerings, which include weights, nutritional supplements, treadmills and gym memberships.
“At Truemed, we've seen that when given a choice, Americans choose to invest their healthcare dollars in proven lifestyle changes like these,” Truemed CEO Justin Mares told KFF Health News.
Means joined the Department of Health and Human Services in November after working at the White House earlier this year, where he served when Trump signed the One Big Beautiful Bill Act in July. Truemed general counsel Joe Vladeck said Means left the company in August.
When asked about Means' potential to benefit from the HSA expansion, HHS spokeswoman Emily Hilliard said in a statement that “Kelly Means will not personally benefit financially from this proposal as he will be leaving his company as he was hired by HHS as a senior advisor supporting food and nutrition policy.”
Truemed is privately held and not publicly traded, and details of how Means plans to sell the company have not been disclosed.
